The Ascent Of Money - Ep. 5 Safe as houses

The concept and desire to own a house is baked into our minds from early in life, take as an example Monopoly which was at the time hugely popular and widespread. “Safe as houses” is the popular expression, also because of its use as collateral for loans. Banks are happy to provide loans to buy a house, and this has increased 75-fold since 1959. In earlier times, it was only the aristocracy that owned both land and houses, and live off its rent. And only house-owners were allowed to vote in the earliest days of democracy. But as inflation rose and industrialization diminished the importance of land, the economic relevance and political power of the land-owning aristocracy decreased as well. A regular job, with a regular income, became more important than titles and land income. In the pre-Great Depression period, the US was a place where not many workers owned a house and mortgages to obtain them were uncommon. With the Great Depression, a lot of foreclosures happened and social unrest was on the rise. F. D. Roosevelt’s New Deal answered the concerns of the huge groups of unemployed Americans who were more and more inclined to listen to communist voices. It increased the opportunity for average workers to afford an own house and lots of public housing was developed. The Savings and Loans, and later the Federal Housing Administration standardized lending, offered low-interest and long-term loans. As the collateral was ‘safe as a house’, a secondary market of these mortgages was created. The Federal National Mortgage Association (Fannie Mae) issued bonds and bought the loans, thereby making the loans cheaper. By 1960, 60% of the population in US was a house owner. There was another dimension to it: most people enjoying the surge in ownership were white. Black citizens were considered credit unworthy and had to pay much higher interest. This resulted in racial unrest and much struggle, but it was only in the 70’s that the situation improved, that discriminating against blacks became a federal offence and that banks were under pressure to lend to minorities. In the UK, the emphasis was much more public housing than on cheap lending. Also there, the property-owning democracy slowly became a fact, helped by a higher inflation in the ’60s and ’70s. The Saving and Loans, mentioned before, struggled with the inflation and later with the increase in interest rates in the 70s and consequently were deregulated. They were now allowed to invest in much more than long term mortgages, but still insured by the state. This created reckless investing and outright fraud, the biggest of which was the Savings and Loan Empire case in Texas. The management rose funding from brokered deposits and was used to develop empty land into business parks and residences, paid for by investor who borrowed from Savings and Loan Empire. By the time the liabilities were far higher than the assets, which could never be sold at the value that they were accounted for. The company went b